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Kerala PSC Indian Economy Book Study Materials Page 474
Book's First Page18.2 ndian onom among the experts and the policymakers to expand IntroductIon the government’s role in the economy. This led to Public finance is a much wider title which includes the ultimate rise of the public sector around the all those matters which are connected with public world.3 Here we will be looking into the major money, i.e., the money a government gets, spends, concepts related to the area of public finance with borrows, lends, raises or prints. Public finance, i.e., special reference to India. finances of the government, now named as public economics, does not only discuss the issue that how Budget much of the country’s resources the government An annual financial statement of income and should acquire for its own use but also discusses expenditure is generally used for a government, the ‘efficiency’ with which the money should be but it could be of a firm, company, corporation used. Public finance gets reference in the ancient etc.4 The ‘word’ has its origin in the British treatise Arthashastra1 of Kautilya which covers parliamentary exercise of preparing such ‘treasury, sources of revenue, accounts and audit’ statement way back in the mid-18th century from in a very detailed way. However, the subject has the French word ‘Bugeut’ meaning a leather bag gathered much significance in the post Second out of which the financial statement was brought World War period once the governments’ role in out and presented in the parliament. Today, this the economy started expanding2 due to various word is used to mean the annual statement in all reasons namely, the rise of public sector, the economies around the world. delivery of public goods, law and order, defence, etc. By the Second World War, the importance The Constitution of India has a provision of the government’s role in the economy was (Art. 112) for such a document called Annual urgently felt and it was believed that all needs of Financial Statement to be presented in the the people cannot be met if the economy is left to Parliament before the commencement of every the market (i.e., the private sector) in its entirety. new fiscal year—popular as the Union Budget. For example, national defence, law enforcement Same provision is there for the states, too. and other major areas which must be cared for by the national government besides the supplies DAtA in the buDget of affordable or free healthcare, education, social The Union Budget has three sets5 of data for every security measures, etc., could only be taken care concerned sector or sub-sector of the economy: of by the governments (as they are not profit (i) Actual data of the preceding year (here driven). This is why there was an agreement preceding year means one year before the year in which the Budget is being 1. L. N. Rangarajan (ed.), The Arthashastra, Penguin Books, (New Delhi, 1992). presented. Suppose the Budget presented 2. The size of government expenditure for the developed 3. It should be noted here that the world which had the economies stood at almost 10 per cent of their GDPs at the form of the state economy (i.e., the socialist countries at begining of the 20th century—which could rise to 18 per this time, majority of the economic activities were under cent only at the outbreak of the second world war—went government control. As the communist form of the state for a steep rise by 1980 to 40 per cent. The government economy emerged by the late 1940s (i.e., Peoples Republic expenditure was barely 9 per cent of the GDP in India at of China, 1949), it had 100 per cent state control over the the time of Independence, nearly doubled in 1970s and economic activities. reach 75 per cent in the 1980s—when questions were raised about their sustainability as revenue receipts failed 4. Collins Dictionary of Economics, op. cit., & Oxford to grow adequately resulting in rising udgetary deficits Dictionary of Business, op. cit. (see Amaresh Bagchi (ed.), Readings in Public Finance, 5. Based on the budgetary documents of the Ministry of Oxford University Press, (New Delhi: 2005) pp. 1–4. Finance, Government of India, New Delhi.